tv Bloomberg Markets European Open Bloomberg August 18, 2017 2:30am-4:00am EDT
♪ guy: welcome to bloomberg markets. cash is opening in around 30 minutes. i'm in london, matt miller is in berlin. police kill five suspected terrorists after an attack in barcelona leaving 13 dead and 100 injured. s&p falls, volatility spikes. does risk off have could further to run? keep your eye on dollar-yen.
the german electorate is undecided on who to vote for in next month's election. could we be in for a surprise result? matt: less than a half hour away from the european open. let's take a look at how the market is assessing the damage anderday done in barcelona the response from the trump administration among other things. futures down across the board. we have a drops in u.s. equities yesterday i think the second drop is more than 1% in one week. something we have not seen in at least the last six months. we have not seen a 1% out of .his month since march it has been a wild. ets are getting back to risk off. you can see a three-day trade of the german bunds, now down/
. a one-day trade you can see that today is a day on which investors are buying those bunds, pushing up the price and driving down the yield. function this morning, the s&p down by 15 percent. equity markets certainly paying attention yesterday. we are still trading in light liquidity but certainly something to pay attention to. the nikkei down by 1.2%. nor white down 1.4%. european markets under pressure yesterday. keep an eye on dollar-yen. great analysis being done on the mliv blog. your terminal talking about that. argentina being a big standout story this month and it is based on an election result that does not have that much bearing. the emerging markets are really quite interesting at the moment.
let's show you what else is going on around the market space. the czech economy seems to be in focus with the data coming through. zinc continues to be a focus as well. the metals markets and the rest of the spaces again with focusing on. let's get a first word news of update with juliette starley. juliette: suspected terrorists killed by police and civilians selled and a confrontation the barcelona hours after 13 people died and 100 were injured after a van was driven down loss run let's. -- las ramblas. islamic state has claimed responsibility for the attack. our neighbors in madrid, nice, brussels, berlin, london
have experienced the same horror that the people of barcelona have suffered and i want my first words to convey to them the affection, the solidarity, and the affinity of the whole of spain and the whole of the world. >> donald trump will not move forward with a plan to advisory council on infrastructure according to the person familiar. the council which was still being formed would have advised trump on his plan to spend as much as $1 trillion upgrading roads bridges and public works. following the announcement wednesday he will be suspending to other panels. a senate republican who once considered joining the administration has called for radical changes. telling reporters in his home state of tennessee that the president has not yet demonstrated the characteristics needed to serve in his job. another senate republican of south carolina says that trump
has compromised his moral authority with his response to last weekend's violence in charlottesville, virginia. sentte house official has jerry, and to remain in his position as director of the national economic council. particularly upset about the remarks in charlottesville. leading the trump administration's efforts to overhaul the tax code. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. guy, matt? guy: thank you very much indeed. spanish radio reporting that he further suspect has been arrested in relation to the barcelona attack reported by the spanish media. we will come back when we get more details on that. this follows what happened yesterday. the details still beginning to emerge as to how this story
unfolded. we know that five terrorist suspects shot dead by police in a town south of barcelona after in attack in the cities -- las ramblas avenue. the government says the incidence are links. incidents are links. what questions are the spanish asking about this attack? is>e big question here where the perpetrator and are thehow big it was things police are working on. the question is will they be up to find the people who are supporting the attacks? for five orooking six other people who are part of the logistics of the attack you
that is the main focus everybody has today. what to do the police no right now about the first attack ? driving thee person van that got away and is still at large, to other people were arrested in towns outside of barcelona. one of them arrested in a town on the previous night where there had been a explosion that destroyed a house. they thought it was due to a gas they believe it was probably a terrorist cell doing some tort -- sort of test. listened to him speaking yesterday, and he talked about the fact that the whole of spain stands behind barcelona and with barcelona. understandable sentiments. -- was there a?
subtext? there is a referendum coming up in catalonia the first of october. would what happened yesterday and what has happened overnight have any bearing on the referendum which is nonbinding and the spanish government are dismissing it. does this filter into the politics of the region? >> obviously it is on some people's minds. think it is a key driver at this stage. it could affect sentiment of how people feel barcelona about the situation, what their main concern is today. that may have a direct impact on the referendum. however, i do not think it is the top of anybody's agenda. spain, theto
president of catalonia yesterday toward the ends of his own press said he was thinking the police and the services of the national government and at this time there are no divisions that count. absolutely. given the events that unfolded, totally understandable that sentiment. clearly were going to have more on this story. we will have you the latest as it develops. in the last few minutes there have been reports in the media that a rather suspect has been arrested as a result of what happened yesterday in and around the barcelona region. a developing story. this is bloomberg.
♪ comeback, asian stocks are extending a global slide as volatility spikes higher. our next guest says north korea, charlottesville, and gary cohn are catalyst sort excuses for equity weakness whatnot the main reason stocks continue to sell off and will keep doing so for another couple of weeks. the mlivategist at team in singapore joins us now. log --e outlined on the blog, a number of key reasons the market is going to continue to selloff. can you global couple of them
for it -- can you go through a couple of them for us? >> one of the big changes is excess capital in this market. investors have too much cast and their -- cash. that context i should say politics, geopolitics have no real impact. korea, tests from north turmoil in washington, whatever we have seen we rallied on it there has been a change -- on. there has been a change recently in the u.s.. the first time in almost one decade that companies that beat earnings were not rewarded. investors are not ready to buy. you put that together with the fact that we are in holiday mode and investors are watching the screens, the fact that retail cash locations are at a low since 2000. this is not the money that is
rushing in this time. an environment where volatility can creep up across asset. -- assets. over a week ago we are going to have a sustained direction and we have certain news events that are jumping around, providing a spurt of negativity -- a of negativity. catalysts from trump to go into barcelona. everything was trading badly. looking at the vix, the one you reference. this is a three-month chart. does not feel very high at 15 but relative to what we have seen over this summer that is a big level. >> that is a good point. it is not particularly elevated.
we are not seeing volatility but it is in the context of where we have been. because it has such low volatility, investors have had to keep on getting higher and higher returns. we got maximum leverage at the lowest liquidity. we're seeing the vix pickup, the spikes with this week it's said through mextising w -- next week. we're going to reduce risk. environment will stay tough for a couple of weeks. mark, interesting stuff as well talking about the big outside moves we have seen in history on dollar yen. the move second really change the market. many big figures in terms of the move we can see. we could be
approaching something like that here? >> i don't think there is any sense that we are approaching a extreme scenario. morning, 2008this the russian crisis in 98. 1990 for the correction as well. there are specific events. it is just a reminder that modern investors have spent nine years used to low liquidity. the last five or six years is not aware of how quickly things can change. 2008, don't would have been very gradual before that and suddenly the paradigm shifted . things can change very quickly. how with the market react if cohen quit? >> very bad news. one of the things we're discussing here is it is typically bad for markets. that should not be seeing -- i
think markets are going to trade badly whether he quits or not. that is another catalyst to get even worst. i don't think markets will trade well the next week or two even if cohen stays you i'm not expecting him to leave. that will be another sudden blow. this is not because we are becoming structurally bearish, we think there is a positive build in the environment. it is a very bad time of year for volatility to pick up. that will cause a bit of a material crash for a couple of weeks. guy: interesting stuff. great this morning, thank you very much indeed. team, a great team. you can follow it with their analysis on what is happening in these markets. read the back end of yesterday's one, this morning, and follow it throughout the day. airlinehappening in the sectors, easyjet looking to
capitalize on air berlin insolvency. it could expand intercontinental flights and allow easyjet to boost its presence in the german capital. joining us from berlin. where do things stand on whether the various parties airlines go from here. well, talks are intense. they are going to finish this up as quick as possible because the uncertainty for germany for air berlin employees is not good for travelers. the talks are quite intense. the next big chunk will go to easyjet in terms of picking up a chunk of the berlin operations and some of the a320s. matt: what we are hearing is that lufthansa will pick up the longer haul and easyjet will pick up the inter-german shorter
haul. german government officials are flying back and forth between german cities all the time on air berlin now. are they going towards to fly around on easyjet is an is almost a national security question? when you let a british soon to be no longer in the eu airline operates your domestic airline travel routes? >> i-12 it is a security issue in that sense. they're going to come up with an austrian operating license soon. they will have a european foothold. the question is, a fair question, to what extent lufthansa takes over the domestic travel operations in german government. to get the politicians from different corners in berlin and brussels. i do not think it will go all of the domestic stuff but that is what we will have to see.
some of it may fade away and the german government is going to have to take the blunt you matt: is this becoming an election issue? afloat couldrlin be a idea because they will actually gets to come back with their air berlin flight. schulz does not think that is a good idea. >> it is for the german government. there are two significant issues going on right now. you have the diesel summit which is an industry that is near and dear to merkel's heart and you have the air berlin situation. it is going to be hard to pin either one of them on merkel, especially they had problems with the coalition. it is to issues like economic issues for an economy that is really so strong they are having to deal with right now. time, air berlin and
the employees at least through the election. a loss written about the fact that effectively sometimes there berlin -- air berlin to keep ryanair at arm's reach. reactionhy lufthansa's in the way that it has. this is by the german government has reacted way it has -- why do german government has reacted the way it has. does he have a point surrounding this and do you think the authority will have a very careful look at this? >> yeah. he does have a point. basically ao be done deal before the insolvency was announced. german government is working
behind the scenes for quite a while to make sure air berlin does not just collapsed in an uncontrolled way. they want to get as much of air berlin in the hands of lufthansa as possible to make sure german government officials are not flying on a foreign carrier. point whether or not cartel authorities have an issue there. so far they have said no. the german government has said they don't have a problem. this is a fair point because ryanair and easyjet are significant players in the german market. ryanair has been expanding aggressively. whatever happens to air berlin you probably see ryanair and he gets expanding one way or another. matt: i thought it was interesting to see a comment from martin schulz, the candidate against merkel referencing michael o'leary. there is no bigger capitalist than this man and i believe in this sense he met capitalists as
an insult. it does sound for georgia. -- for george's -- prince -- prejorative. we will carry on with what is happening in barcelona, front of our minds as we digest the horrible events that took place yesterday and this is covenant -- the subsequent shooting. another suspect has been arrested. more on this through the mornings open. six minutes away. this is bloomberg.
♪ theory let us take a quick look at what the fair values are telling us. down by 0.9%. down by 0.8%. the ibex down 1.3% this morning. we are likely to see some market reaction based on spain today. matt: i have a chart here. the size of the moves in the s&p 500 broken down on a daily basis. the red line, anything that goes young that is below 1%.
anything above the greenline goes above 1%. we have not had any of these kinds of swings lately and now a week.had two in the last time we had a 1% moved to the downside was in may. this just shows you have seriously the markets have taken these issues. london to open down 0.5% and slightly bigger moves in the continental markets. down like spain will open by over 1% this morning following the attacks from yesterday. there is the stoxx 600. we are waiting to see how the dax will open and the ibex. ibex, down as suggested by about 133%. we are expecting similar numbers or the -- similar numbers for the cac and dthe dax. the stoxx 600 down by only 0.6%,
it pretty much in line with the ftse. significant softness in the continent markets. the ibex is down by 1.3%. imap.i am looking at my i realize i have to change this because mine is in german right now but i will do some translation. financials are the biggest losers. i.t. is clear as is industrials. and the materials. raw materials are losers as well. the least of the losers are real ,state, health care, telecom and utilities. you have basically the defensive stocks. you would expect on a day like today would be the least of the losers. and financials are down the most. everybody though, obviously, are down after the big moves in the
u.s. carry through asia and now into europe. all of the industry groups are down. guy: in terms of where we are seeing the losers -- ryanair is -- ryanair is down as is easyjet. a market reaction to what we are seeing out of spain. participants big in the spanish air routes down to barcelona. aether or not there is reaction in the tourism story, we will wait and see but certainly the market is marking down. there are also a bunch of spanish stocks including spanish byks -- santander is down 1.9% today. there does appear to be a reaction in the spanish market. the spanish market is underperforming compared to its peers. and easyjet as well as
the hotel groups are under pressure. five suspected terrorists shot dead by police following the attack in barcelona. 13 fatalities resulting there. lanta government -- the government says the incidents are linked. asked youquestion i earlier, but let us recap it. the authorities have a bunch of questions that they need answers to and they are trying to piece together what the cell looked like, who was involved and who is missing from its ranks. --whatger question is are the spanish people asking about this attack? operandiith a modus that is clear. we have seen vehicle attacks used in a bunch of cities. are the spanish asking why here and could it have been
prevented? >> i do not think that is a question. like the opposite. there was an expectation among people, especially those at the attention to these kinds of attacks. that this would likely happen in spain at some stage. when because it has happened in isope and number two, spain a big economy in europe and a tourism magnet. it makes sense that this would be a likely objective. and also, spain has a history of networks, terrorist linked networks operating out of spain. they do not necessarily attack in spain but they give support to attacks in europe. there has always been a lot of attention paid to terrorist groups in spain. i think that puts to rest the question you were making about
why it would happen here. regarding the other part of the question --could it have been prevented? i think the feeling is that the police have acted quickly and it is well coordinated even though there may have been some questions at the beginning of the night. matt: the question puzzles me as well. i know you have had a horrible in the lastttacks couple of decades. but, the islamic integration in , at least, more notable than any other country in europe. it always stuns me more when things like this happen in spain. let us talk about the facts. what do the police know right now about these attacks. start with the first. >> there are three stages. first stage is what happened specifically yesterday evening. a van hit a group, three people
were involved. one was the driver and two others have been arrested. the driver is still at large. the second stage is that the been aefore there had strange incident where a house exploded in a town outside of barcelona. where one of the suspects was subsequently arrested. that house is now believed to be a base that the terrorists were using to repair. and the third stage is that the attack that happened late last after midnight, where five terrorists were attacked when they were preparing to set off bombs in the town outside of barcelona. three stages. that is what we know. they also seem to be pretty sure that there is a network of support which is the main objective right now. seeing the travel and leisure stocks being marked
down right now. ryanair and easyjet marking down 3%. many that travel to barcelona are tourists. have the spanish authorities taken action to protect those tourists arriving in barcelona? in other capitals, you look at what is happening in london where they are putting barricades on bridges to protect people walking there. are caves blocks going up in spain? do you see that in madrid? do you see it in barcelona? the response to that question is no. you do not see any barricades. like in london. that is one question people are raising is why do we not have this, especially in the pedestrian areas. that does not exist here though
that may change. however, the one thing you have to give the spanish police is int since the paris attacks 2015, they have been on high alert. they have a five level alert system and they are on the second one which means there is a lot of police and control on the streets. that has been operative and worked on a lot. there is a lot of concern about protecting the tourism industry and protecting the citizens. but not with those kinds of structures. guy: thank you very much indeed. roderigo joining us on the latest coming out from spain. we will continue to monitor the events. as i say, we are seeing some impact on the travel and leisure stocks. owns iberia.
you can see ryanair and easyjet being marked down. the madrid market underperforming at the start of trading we are also seeing some hotel stocks marking down as well as a result of what happened. let us join to him. -- join tim. i think you can betweenairly clear line what happened to the travel and leisure stocks. this is a main hub. more broadly, the market is very used to these kinds of incidents are a grim reality. but a reality. when i look at what has happened in the last few for hours in terms of market action, did barcelona play a role or are there other factors? >> it is hard to know because you had some of the political news in the u.s. weighing on sentiment today. there was already eat -- week
equity market performance. sign always difficult to a -- to assign a causality to it. is --the question though the market sadly has gotten used to terrorist attacks but it has also gotten used to all of the scandals out of the trump white house. the market has never really flinched at anything donald trump says or does. it seems that this time it is different. would you agree with that statement? that it is different this week? >> one of the main differences was pointed out in an earlier segment with mark. in that liquidity right now is probably not so good. summer months. seasonally, august has been more volatile than other months.
and there are a lot of people not focused as much on the market. that will add to swings in volatility. you had the chart that pointed out the magnitude of moves on daily moves in the s&p. and you are getting them more concentrated. thatnot know if necessarily changes things for the long-term. i think it may be a short-term phenomenon you have a backdrop of increased risk aversion taking place against the backdrop of lower volatility. , stick around. we will talk next about the trump administration and what is happening. there are plenty of great functions on the bloomberg. you can follow tv . click into the interact if -- click into the interactive tv. you can find the tv stream and all of the charge. down here, you have recommended videos. the most recommended one is -- easy -- europe is an
what we see happening in spain, you can see the stoxx 600 is down 1%. the ftse down 0.7%. in frankfurt, the dax is down. on in what you see going the ibex. 1% drop they are but you see iberia is down more than 3% and ryanair down almost 3%. the travel and leisure stocks, the grouping you see at the top will be strongly affected by terrorist activity and right now, we have the entire group down more than 1%. those stocks are being hit harder and the rest in europe. still come in european stocks are down across the board. their worsts posted day in three months on speculation that gary cohn could possibly resign from the trump white house. overamid growing unease the inability of the president
to enact sweeping reform in an increasingly hostile environment. still with us is tim graph. we talk about the effects of donald trump's comments on the market. but, more important to investors, is whether or not he can actually improve the infrastructure picture or invest way orn a stimulative even achieve tax reform, the holy grail for any president. it would be terribly difficult. what are the chances that donald trump gets any of this through? tim: i think it is becoming increasingly difficult by the day. that item on his agenda, infrastructure, looks evermore challenged. leaders,rt of business they are abandoning him over his response to the charlottesville incident. it is all very telling. very good reason to doubt some
of the elements of his legislative agenda. losing theed -- support of the business which is sympathetic to corporate tax reform, that his not augur well for agenda, especially the tax reform elements. guy: there are midterms coming. they have nothing to show at this point in time. done.ave to get stuff are we looking at a situation where congress says -- i am sorry but you consider over there or jump up and down, but we have to get stuff done in congress. congress will say -- we have to take the lead. you almost wonder if gary cohn is sitting in the white house saying -- i have to be the guy from this end of the pipe that makes that happen. if we do not get anything done between now and the midterms, the republican party will suffer for it. tim: right now, there is cause
for a lot of people to resign in the last week. you want competent people in there. projecting policy. and pushing policy forward. but republicans have to walk a fine line. the midterms are coming but so are the republican primaries. they cannot abandon the president to forcefully for fear 'd out.g primary i think they have to walk a fine line. with things like the debt ceiling coming up, the nafta renegotiations going on, i wonder if we will continue to see, other than the senior senators like john mccain or worker who have the political capital to speak out, i wonder if the rest will be more reticent for the time being. matt: i want to point out a
chart that hillary put together for us. it is pretty incredible. bloomberg users can pull this up. chart -- the infrastructure projects around the u.s. and the lighter dots are the more expensive projects. dots are eachnk $500 million, estimated. over ahter ones get up billion dollars each. there is a lot to do. we talk about take all here -- teigel here in berlin but la guardia is the tip of the iceberg. can private industry that together to make this happen if the trump administration does not? tim: it is very hard. airports being a good example. the level of cost involved in
revamping something like an airport is very difficult for the private sector to take on given the amount of debt that would be required to initiate. in some sense, it might be state and local governments that can step up, but even there, you have constraints on debt levels. and the ability of those entities to pursue those projects. the big infrastructure projects, the hallmark of american growth in the 1950's and 1960's, came from the federal level. that is theways, real tragedy, the lost opportunities we have in efforts to improve the infrastructure of the country. guy: let us turn to what is happening in the markets. gold catching a bit. it was trading below the 1300 level. dollar-yen on the move as well. the risk off trade is beginning to manifest itself this morning a little more forcefully. some moves. itching tor matt
comment on that. anticipation is everything. you are not concerned or freaked out by these markets? jittery in feel response to some of the big incidents we have seen in the few years. tim: the performance of the yen is something to keep an eye on given that the economic woulderations aside, you think the yen would be in an environment where it is potentially weakening. the fed seems to be on a course to tighten its balance sheet. and the yen should be under pressure and yet, because of these concerns, it is still performing well. as far as the cyclical story, nothing is on my radar screen flagging a warning. canchinese growth proxies
serve as a leading indicator for the rest of the emerging markets. and they still look reasonably healthy. the cycle still looks relatively intact. keeping an eye on these barometers though is important. guy: we are not getting structurally bearish tim:. -- we're not a getting structurally bearish. im: we are seeing a bit of a bull. guy: we will continue to be the latest on the police story. we will bring you all of the details on the barcelona attacks. this is parcel -- this is bloomberg. ♪
♪ welcome back to "bloomberg markets: european open" i am matt miller. i want to get to the bloomberg first word news. spanish police have killed five suspected terrorists after a confrontation in a town south of barcelona. downcomes after a van went area killing 13. the government said there was a connected incident in another town south of barcelona. >> our neighbors have
thatienced the same horror the people of barcelona have suffered. i want my first words to convey to than the affection, the solidarity, and the affinity of the whole of spain and the whole of the world. >> the white house officials have said gary cohn will remain in his position. he was said to have been particularly upset over the remarks over the violence in charlottesville. he has been leading the effort to overhaul the tax system. global news 24 hours a day powered by our 2700 journalists and analysts in more than 120 countries. this is bloomberg. guy: thank you. we will have plenty more on all of those stories coming up. and we will continue to market -- we will continue to monitor what is happening in the markets. this is bloomberg. ♪
police kill five suspected terrorists hours after a van attack in barcelona. more than 100 injured. the s&p falls in volatility spikes amid speculation gary cohn could resign. does risk off have further to run? watch the dollar-yen cross. a new survey says that nearly half the german electorate is undecided on whom to vote for in the next month's election. could we be in for a surprise result, or will they not bother going to be voting booths?
i'm matt miller in berlin, alongside guy johnson. guy: let's look at how we are, 30 minutes into the trading day. first of all, you need to see the stan spanish market is underperforming, down by 1.14%, following the attack in barcelona. the travel and leisure stocks are underperforming as well. iag is also a stock to watch out for. stocks like ryanair and easyjet, certainly under pressure. we're watching what is happening with gold. we are watching the golden story and what is happening with the yen. 1300 thised through morning. we have backed off it now. nevertheless, i still scratch my head and wonder why.
the risk on sentiment is there as well. let's look at the yen. dollar-yen has been something to watch during this process. we are seeing the dollar coming under a little bit of pressure 1.0903. let's see how the rest of the session unwinds. it's, in some ways, you are seeing a clearer market reaction this morning to the attack in barcelona. but barcelona being such a clear hub for tourism and the fact that terrorism story has come to it, it's selling some of the travel and leisure stocks, a more logical reaction than we have seen. the other story to mention is what is happening with the ecb. we saw a euro reaction yesterday following the ecb accounts.
they want more scope to release monetary stimulus, even as they head to unwinding it. some policymakers are looking for insurance, as they argue for more policy space to adjust stimulus and east the direction. others were anxious to press ahead. that's not what moved the market. what moved the market yesterday was the story surrounding the euro and the ecb accounts indicating the ecb governing council is getting slightly concerned about levels. in detail, what it said was, future levels. that seems to imply that the current level around 1.17 euro-dollar is something the ecb is comfortable with. tim graff, still with us. people have been speculating whether draghi would use jackson hole to talk the euro down.
was yesterday verbal intervention and if it was, did the market overreact? >> i think it'd overreact. whether or not it was intervention is difficult to say. the fundamental environment in eurozone is improving in that very much justifies the euro strength we have seen. you have seen growth rates improve. you have seen falling unemployment in almost all of the eurozone economies. and you are getting countries like portugal. with unemployment rates below the eurozone average. you are seeing rising rates of core inflation in the majority of the eurozone economies. it is not surprising that you are starting to see the euro react. yet, i do think the overreaction is there. if you look at most fair value models, it's not expensive. look at the trade balances and the current account balances, they are still very strong. it is not the sign of expensive currency. look at the real effect of the
exchange rates of the euro over a long time horizon. we are not at excessively strong levels, i don't think. it was an overreaction. francine: are the drops we have seen in european stocks, tim, a buying opportunity? or is this an opportunity to sell some debt? we do have strong growth in germany and france, but spain and italy are coming out with some surprisingly good economic figures. tim: yeah, the sector like european financials, which has lagged for years, and is still a very attractively valued sector, as long as you can get through some of these risk hicc ups, they will still represent decent value. they are not the credit pockets of the european equity market. there is a case to say that it was a consensus trade. there probably is scope for pullback. at the same time the valuation
case is not as stretched as u.s. equities are. the currency offers you the potential for further upside as well, given its valuation is not that stretched relative to a long run history. guy: you and i were discussing some of the cash balances that came out of the bank of america merrill lynch survey that was released a few days back. by large, investors are still overweight cash, but are underway cash when it comes to the emerging markets. what can we learn about where investor's minds are, in terms of where they see the opportunities? i want to come back to matt's question about europe buying the dip. how far down the road are we? will is excess cash flows continue to flow elsewhere? tim: to me, the signaling from that is probably in one of yield chasing, particularly in local currency and fixed income markets.
if i had to guess, that is where the cash has been deployed. if you get some rotation, i wonder if it might then go to the equity side of the emerging-market, for you have more of a valuation case. it has been a little bit lagging in the sense of the crowds fillinbuilding up. that's not the case in the equity market. as long as we have risk conditions and financial conditions remaining relatively stable and robust, that rotation might have them within emerging markets, just to the riskier side of the spectrum. matt: you think there is enough retail money out there right now? we keep hearing in the u.s. how retail cash is spent. tim: it is very difficult to know. a lot of what you see is survey-based or anecdotal as far as retail sentiment. ti's -- it's hard to know. things like the bank of america
survey indicate there is cash still sitting there. guy: let's turn our attention back to the eurozone. financial conditions in the eurozone have, in some ways, tightened. this has been a result of what we have seen in the currency. it is a 40 basis point move. we have come from up here to where we are now. goes -- what levels do a need to get on the euro, where it starts actually having a negative, improper negative effect on european growth? tim: i think it probably needs to be 5% to 10% higher. as important as the level is the speed with which he gets there. if this becomes a disorderly move, things like the yen strength the boj would always mor worry about, the level concerns them, but it was how you got there. that was as much of a concern for them.
if you do get sharp euro appreciation, that might be worrisome. for as long as we have a gradual path, or a knifnice trend, i don't see the euro as excessively overvalued. the ecb officials say the euro strength as a good thing, a reflection of the success they have had. matt: what do you think about the pound, tim? we have been hearing reports. bank of america is one. all the smart money they have is basically out and the dumb money is selling. that is nothing good. you have reports from a couple of banks, including hsbc. they see the pound-euro parity, or even be on that. it seems everyone is against it. tim: put me in the dumb money crowd. i think when you look at some of the data this week, there is clearly no reason for the bank of england to think about
near-term interest rate hikes. even though yesterday's retail sales volume data, they beat expectations. if you look at the level of retail sales in the u.k., at an index level, it has barely moved for eight to 10 months. it has very much leveled off. that is the key to the u.k. story. you still have wages under pressure. i think that keeps the consumer weak as well. i'm not a buyer nearterm. euro-sterling parity is in play, i'm not certain. matt: thank you for spending so much time with us here on bloomberg television. tim is not done, though. matt and i will be taking him over to digital radio and carry on the conversation with tim graf, coming up very shortly at the top of the hour. in the meantime, let me update you on the markets.
600, softer this morning. you are looking at the underperformance of the spanish market, down by 1.1%. iag, owner of british airways, is down by 2.1%. ryanair, significant expansion in the spanish market, down by 1.5%. some of the spanish hotel stocks are under pressure as well. you do see a read across. barcelona is a big tourist hub. as a result of which, the attack that we saw in barcelona is having a meaningful impact on the market this morning. this is bloomberg. ♪ guy: 44 minutes into the cash
session. reporter: believe have killed five suspected terrorists after confrontation in a town south of barcelona. this came's hours after a van rampaged down a city street. six civilians were injured in ls, second incident in cambri which they said was connected to the barcelona attack. >> our neighbors in madrid, brussels, berlin, or london have experienced the same horror that the people of barcelona have suffered and i want my first thes to convey to them
affection, solidarity and affinity of the whole of spain and the whole of the world. reporter: donald trump will not move forward with his planned advisory council on infrastructure. the infrastructure council, which was still being formed, would advise donald trump on his plans to spend as much of the $1 trillion of getting roads and other public works. the cancellation follows his announcement on wednesday that he was disbanding two other business advisory councils. a republican who once consider joining donald trump's administration has had "radical changes." the president has not yet demonstrated the characteristics needed to serve his job. another senate republican, tim scott of south carolina, said donald trump has compromised his moral authority with his response to last week's violence in charlottesville. an official said gary cohn will remain in his position as director of the national economic council.
he was said to have been particularly upset over donald trump's remakrks. he has been leading the trump administration's efforts to overhaul the u.s. tax code. the trade deal with the european union after brexit is desirable, not essential. that is the view of the institute of economic affairs. the thinktank says britain should walk away from talks if the eu offers terms that are protectionist. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. this is bloomberg. matt: thank you. a new survey finds half the german electorate is still undecided about whom to vote for. and nearly 60% of women do not know which party they will choose on september 24 and that is according to opinion research institute.
joining us now is aiko wagner, a research fellow at the berlin school of social sciences. first to talk about this, aiko, is that because -- if you are not passionately driven to one candidate or the other, it doesn't matter to you who wins. you may not even bother to vote. is that how this is going to play out? aiko: i think 50% of undecided voters is not very unusual in germany. we have a large and growing population. they make up their minds only in the last week or days of the election campaign. but it is true, we don't have a very polarized campaign until now. this might be one inflation for this undecided nest of large proportions -- undecidedness of the large proportions of the voters. matt: i have a chart here. our bloomberg users can access this. csu shows up here at
38.5%. fpd, 23%.the isn't this a slamdunk for merkel? aiko: it seems quite so, but the spd is hoping for this renewal of this effect for the renewal of this year after the nomination of martin schulz when they jump in the polls from 20% to over 30%. due to the fact that large parts of germany are still on their summer holidays, they hope to get closer to the 35% and maybe get some votes from the cdu n, orrters, making it eve becoming the largest party.
this seems not very likely. matt: guy? guy: good morning from london. the polling suggests the afd is around 10%. the numbers matt were reading out suggest those who say they will vote for the afd are very likely to do so. what impact will be afd getting into parliament have? aiko: well, i think it is quite clear that the afd will make additions to parliament. of course, you can never be sure. succeed, it will be much more complicated to form a coalition. we have the grand coalition of, which has the majority, according to the polls. is a make it more difficult. on the other hand, the afd would get a platform to promote their visions or their ideas more strongly to the public. so, this would be the two
major effects. guy: what do you think the spd would demand from angela merkel? would they try to form a coalition? aiko: i think what they reducingwants, it's taxes, making the market for flexible, reducing bureaucracy and those kinds of things, the typical market liberal attitude. i think there would be nothing surprising they would ask. matt: we had angela merkel booed out by afd right wing protesters yesterday. in wonder, in light of the barcelona attacks, how serious do you think concern about immigration or refugees is here in germany? it strikes me that after 1.3 million come into the country, most germans seem relatively happy to have the refugees here, or at least, not ready to vote
angela merkel out of office because of it. aiko: no. while the situation was complicated in 2015, with a lot of refugees coming into the country. at the same time and some smaller towns and bigger towns of berlin, for example. they had their problems to get housing for them. but now, the situation is much more relaxed and the issue is not as prevalent as it was before. it's not the decisive issue of the campaign. it mobilized parts of the electorate. matt: what is the decisive issue of the campaign? aiko: nobody knows. there is no big issue that drive s the campaign yet. it's a little dull. matt: i don't think it is dull. about diesel.
hopefully we can have you back to talk about this before the election. aiko wagner, talking to us about the german elections. coming up, we look at how the markets are reacting to the terror attack in barcelona, and probably semi-reacting still to the donald trump issues in the u.s. we do have airlines and hotels groups that are trading lower. tourist stocks are trading lower than the rest of the market. this is bloomberg. ♪ matt: welcome back to the open.
we are getting breaking news from air berlin, the german airline that recently filed for bankruptcy and is being picked over by rivals. they are not going to publish the first half results. ais is according to dpa, typically reliable press agency. it's saying air berlin will postpone the publication of the first half results indefinitely. probably not a massive surprise because they do not have enough money to pay their debt. they filed for bankruptcy. you can rest assured the first half results are not fantastic. it would be interesting to see, of course and it surely easyjet and lufthansa who want to see those books, but the market it appears, guy, is not going to
get a look at those results, not in a published form. suppose some people are looking at them carefully. now we do see some pressure on some of the airline stocks this morning and stocks related to spain. the iag is the holding company. down 2.4%. easyjet is under pressure. barcelona represents a significant opportunity. stockst, ryanair, these under pressure on the tourism related story as a result of the barcelona attacks. let's look at some of the hotel stocks. the travel and leisure sector as a whole is trading down. the madrid market is firming a little bit, but you still trading down by around 1%, following the horrible attacks we saw yesterday in barcelona. we will continue to monitor events as they develop in spain.